Powell to make last-ditch effort on COVID-19 relief

Federal Reserve Board Chairman Jerome Powell will head to Capitol Hill this week for three days of testimony in what will likely be his last chance to try to push Congress toward another coronavirus relief bill before Election Day.

For months, Powell has told lawmakers that the Fed has “lending powers, not spending powers,” and that significant COVID-19 aid is needed sooner rather than later. Without it, Powell warned as recently as last week, millions of Americans may continue to suffer from joblessness and homelessness despite a gradual improvement in the economy.

“That will start to show up in economic activity. It’ll also show up in things like evictions and foreclosures and things that will scar and damage the economy,” Powell told reporters following the Fed’s final policy meeting before the elections.

Powell is set to make the case for stimulus this week before three congressional committees. But the close ties between Powell and lawmakers that won the Fed wide bipartisan praise and billions to backstop the crisis response early on in the pandemic may yield little progress toward his goal.

The months-long stalemate between Republicans and Democrats over the size and scope of another coronavirus package has only deepened with Election Day roughly six weeks away.

On top of that, the Sept. 30 deadline to avert a government shutdown and the bitter battle over the Supreme Court vacancy left by the passing of Justice Ruth Bader Ginsburg have shifted the focus of many lawmakers.

The Fed is also facing criticism of its own response to the crisis as ambitious programs meant to bolster businesses and local governments have stumbled out of the gate.

“Congress is increasingly trying to pressure him to do what he can, because they know that they’re not doing anything either,” said Ian Katz, director at policy research firm Capital Alpha Partners.

“But I think they know that he actually has a fairly strong argument that if you really want to move the needle on this, probably, Congress has to do something.”

The March enactment of the $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act may be the high-water mark of the Fed’s collaboration with Congress. The record-breaking stimulus bill boosted and expanded eligibility for unemployment insurance, provided direct stimulus checks to U.S. households, temporarily banned eviction and foreclosures and gave the Fed billions in credit protection for emergency lending programs.

Powell and economists broadly credit the CARES Act for dampening the initial shock of the pandemic and paving the way for the subsequent economic recovery. But with six months since its passage and nearly two months since enhanced unemployed benefits expired, the recovery appears to be slowing as the U.S. heads into a daunting winter.

Powell is one of dozens of high-profile economists who’ve urged Congress to approve another boost to jobless benefits, aid state and local governments to prevent widespread layoffs and extend housing protections.

But Powell’s increasingly direct calls for action have fallen by the wayside as the economy gradually recovers and lawmakers pivot their focus to the political battles ahead, said Brandon Barford, a former Republican staffer on the Senate Banking Committee.

“Both parties love the Fed and they love dealing with technocratic people who are kind of just looking out, at least in their minds, for the best interest of the country when it’s a crisis,” Barford said.

“When the feeling of crisis has subsided, generally, politics takes back over.”

Powell has walked a careful line of hailing lawmakers for the scope and speed of the CARES Act while pushing them to follow it up with another package. While he’s voiced unequivocal support for another bill and certain components, he’s deferred to Congress on the details and refused to condemn them for their inaction so far.

“I don’t think it’s in his personality and I don’t think it’s in his interest to just be critical with a blunt hammer without praising them for what they’ve done,” Katz said.

But Powell’s delicate approach also comes amid increasing scrutiny of the Fed’s own actions in response to the crisis.

Lawmakers in both parties have pushed the Fed to lower the eligibility thresholds for its Municipal Lending Facility for state and local governments. And few companies have been able to access loans from the Fed’s Main Street Lending Program.

Bharat Ramamurti, a member of the congressional oversight commission for the coronavirus response, has called the Main Street Lending Program “a failure,” citing the reported reluctance of banks to furnish loans to struggling companies eligible for the facility.

And Sen. Pat Toomey (R-Pa.), a member of that commission and the Senate Banking Committee, where Powell will appear Thursday, has called on the Fed to close down programs for purchasing corporate bonds amid a rapid recovery in financial markets.

“They’re a lot less receptive to the Fed or anyone else’s message when there’s no crisis. The regular politics picks back over,” Barford said.